FORM 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............. to ..............
Commission File Number 000-25385
PURCHASE POINT MEDIA CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1853993
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
141 Fifth Avenue, New York, New York 10010
(212) 539-6104
(Address and telephone number, including area code, of
registrant's principal executive office)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At February 15, 2000, there were 11,409,577 shares of Common Stock, no
par value, outstanding.
<PAGE>
PURCHASE POINT MEDIA CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information 1
Item 1. Financial Statements
Balance Sheets as of September 30, 1999
(unaudited) and June 30, 1999 2
Statements of Operations and for the three months Ended
September 30, 1999 and 1998 (unaudited) and the Period June
28, 1996 (Date of Formation) through
September 30, 1999 3
Statements of Cash Flows for the Three
Months Ended September 30, 1999 and
1998 (unaudited) and the Period June
28, 1996 (Date of Formation) through
September 30, 1999 4 - 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
or Plan of Operations 7 - 11
Part II. Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Report on Form 8-K 11
Signatures 12
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Certain information and footnote disclosures required under
generally accepted accounting principles have been condensed or omitted from the
following financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that the following
consolidated financial statements be read in conjunction with the year-end
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended June 30, 1999.
The results of operations for the three months ended September
30, 1999, are not necessarily indicative of the results to be expected for the
entire fiscal year or for any other period.
1
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1999 1999
------------- ------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 3,024 $ 97
Prepaid expenses 17,333 18,487
--------- ----------
Total Current Assets 20,357 18,584
Equipment - net 2,654 2,810
Patents and trademarks - net 26,689 27,159
--------- ----------
TOTAL ASSETS $ 49,700 $ 48,553
========= ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Notes payable $ 46,903 $ 46,903
Accounts payable and
accrued expenses 164,123 163,014
Due to officer/shareholder 113,344 86,130
Due to related parties 527,141 508,407
--------- ----------
Total Current Liabilities 851,511 804,454
--------- ----------
Long-term debt 35,500 -
--------- ----------
Total Liabilities 887,011 804,454
--------- ----------
Stockholders' Deficiency:
Preferred stock; no par value -
authorized 50,000,000 shares
outstanding 2,000 shares, at
redemption value 170 170
Common stock, no par value -
authorized, 100,000,000 shares,
issued and outstanding 11,409,577
and 11,375,000 shares 260,497 260,497
Additional paid in capital 23,104 23,104
Deficit accumulated during
development stage (1,121,082) (1,039,672)
---------- ----------
Total Stockholders' Deficiency (837,311) (755,901)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 49,700 $ 48,553
========== ==========
</TABLE>
2
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Period
June 28, 1996
(Date of
Three Months Ended Formation)
September 30, through
------------- September 30,
1999 1998 1999
------ ------ --------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Costs and Expenses:
General and administrative
expenses $ 67,815 $ 140,811 $1,007,311
Interest expense 12,969 9,304 107,849
Depreciation and
amortization 626 776 5,922
--------- --------- --------
Net loss $ 81,410 $ 150,891 $1,121,082
========= ========= =========
Loss per common share -
basic and diluted $ .01 $ .01 $ -
========= ========= =====
Weighted average number of
common shares and
equivalents outstanding
- basic and diluted 11,409,571 11,375,000 -
========== ========== =====
</TABLE>
3
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period
June 28, 1996
Three Months Ended (Date of
September 30, Formation)
------------- through
1999 1998 September 30, 1999
------ ------ -------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ (81,410) $(150,891) $ (1,121,082)
Adjustments to reconcile
net (loss) to net cash
(used in) operating
activities:
Depreciation and
amortization 626 775 5,922
Forgiveness of debt
from related parties - - (25,000)
Non cash compensation 1,154 - 30,941
Changes in operating assets and liabilities:
(Increase) decrease in
other assets - - (5,143)
Increase in accounts
payable and accrued
expenses 1,109 2,536 164,123
------- -------- --------
Net Cash (Used in )
Operating Activities (78,521) (147,580) (950,239)
------- -------- --------
Cash flows from investing activities:
Purchase of equipment - - (3,122)
------- -------- --------
Cash flows from financing activities:
Proceeds from related
party 37,704 78,592 768,173
Proceeds from note 35,500 82,403
Proceeds from officer/
stockholder 30,684 4,038 163,185
</TABLE>
4
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Period
June 28, 1996
Three Months Ended (Date of
September 30, Formation)
------------- through
1999 1998 September 30, 1999
------ ------ -------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Payments to officer/
stockholder (4,840) - (51,211)
Payments to related parties (17,600) (48,500) (258,162)
Proceeds from sale of
common stock - - 251,997
Deposit received for
issuance of shares - 120,000 -
------- ------- --------
Net Cash Provided by
Financing Activities 81,448 154,130 956,385
------- ------- --------
Net increase (decrease)
in cash 2,927 6,550 3,024
Cash - beginning of period 97 - -
------- ------- --------
Cash - end of period $ 3,024 $ 6,550 $ 3,024
====== ======= =======
Supplementary Information:
Cash paid during the year
for:
Interest $ 561 $ 259 $ -
====== ======= =======
Income taxes $ $ - $ -
====== ======= =======
Non-cash investing activities:
Acquisition of business
Fair value of assets
acquired $ - $ 8,500 $ 8,500
====== ======= =======
Forgiveness of related
party loan $ - $ - $25,000
====== ======= =======
Issuance of warrants in
connection with the sale
of common stock $ - $ - $23,104
====== ======= =======
</TABLE>
5
<PAGE>
PURCHASE POINT MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The balance sheet as of September 30, 1999, and the consolidated
statements of operations and cash flows for the three months ended
September 30, 1999 and 1998 have been prepared by the Company and are
unaudited. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and comprehensive income (loss) and cash
flows for all periods presented have been made. Certain items in the
September 30, 1998 financial statements have been reclassified to conform
to September 30, 1999 classifications. The information for June 30, 1999
was derived from audited financial statements.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in a normal course of business.
The Company's primary planned activities are the development and
marketing needed to create, produce and sell advertising space to national
advertisers to be displayed on grocery cart displays. At September 30,
1999, operations had not yet commenced and no revenue has been derived;
accordingly, the Company is considered a development stage enterprise.
There is no assurance that the selling of advertising space to national
advertisers will be developed or that the Company will achieve a profitable
level of operation.
The development activities of the Company are being financed through
advances by a major shareholder The Company's continued existence is
dependent upon its ability to obtain needed working capital through
additional equity and/or debt financing and the commencement of its planned
principal operations. Management is actively seeking additional capital to
ensure the continuation of its development activities. However, there is no
assurance that additional capital will be obtained. These uncertainties
raise substantial doubt about the ability of the Company to continue as a
going concern.
The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the
amounts and classifications of liabilities that might be necessary should
the Company be unable to continue as a going concern.
3. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per common share are computed using the weighted
average number of common shares outstanding during the period. Diluted
earnings per common share are computed using the weighted average number of
common shares and potential common shares outstanding during the period.
6
<PAGE>
4. DEBT
The Company entered into an agreement with Vintage International, Inc.
("Vintage") whereby the Company would borrow from Vintage up to $1,000,000.
Vintage, at its option, may convert the balance of the loan wholly or in part,
at any time, to common stock of the Company at the exercise price of $.50 per
share, the fair market value of the Company's common stock. As of September 30,
1999, the Company received $35,500.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company's quarterly and annual operating results are affected by a
wide variety of factors that could materially and adversely affect revenues
and profitability, including competition from other suppliers; changes in
the regulatory and trade environment; changes in consumer preferences and
spending habits; the inability to successfully manage growth; seasonality;
the ability to introduce and the timing of the introduction of new products
and the inability to obtain adequate supplies or materials at acceptable
prices. As a result of these and other factors, the Company may experience
material fluctuations in future operating results on a quarterly or annual
basis, which could materially and adversely affect its business, financial
condition, operating results, and stock price. Furthermore, this document
and other documents filed by the Company with the Securities and Exchange
Commission (the "SEC") contain certain forward-looking statements under the
Private Securities Litigation Reform Act of 1995 with respect to the
business of the Company. These forward-looking statements are subject to
certain risks and uncertainties, including those mentioned above, and those
detailed in the Company's Annual Report on Form 10-KSB for the year ended
June 30, 1999, which may cause actual results to differ significantly from
these forward-looking statements. The Company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements which may be necessary to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events. An
investment in the Company involves various risks, including those mentioned
above and those which are detailed from time to time in the Company's SEC
filings.
Results of Operations
The following table sets forth for the periods indicated, the
percentage increase or (decrease) of certain items included in the
Company's consolidated statement of operations:
<TABLE>
<CAPTION>
% Increase (Decrease) from Prior Period
---------------------------------------
Three months Ended
September 30, 1999
compared with 1998
------------------
<S> <C>
General and administrative
expense (51.8)%
Interest expense 39.4
Net (loss) (46.1)
</TABLE>
7
<PAGE>
In order to become an operating company, PPMC will have to secure
financing of seven and a half million dollars ($7,500,000). Even though
PPMC has limited capital and resources, management believes that because of
the merits of the last word(R) they will be able to secure the required
financing. Currently PPMC is pursuing two avenues of financing, one is by
pre-selling ad space in the last word(R) and the other is private equity
capital. Discussed below are some of the reasons that lead management to
believe they will be successful.
Over the last decade grocery cart advertising has been losing its
appeal as a method of reaching shoppers at the point of purchase. The
reason; the companies that offer advertising on shopping carts only offer
the advertiser a 8.3% coverage on the carts, which cannot compete with
other in-store media that offer 100% coverage. At a lower cost, PPMC is
able to offer 100% coverage on shopping carts. The last word(R) is a
friendly type of advertising that reaches all the shoppers when they are
trying to remember or deciding what to buy, that is when they are open to
the power of suggestion.
Two types of brands that benefit most from the last word(R) are; A)
The mature brand with well developed image and reduced media budget and low
A to S ratio (advertising to sales) and B) The old and new brand early in a
new positioning campaign where top of mind/unaided awareness has not yet
reached targeted levels. In either case, the last word(R) is just the right
push at the right instant to convert new image or old brand equity into
additional dollars.
PPMC has completed putting together sales tools for sales people who
are now attempting to persuade chain store to rent space on their shopping
carts to PPMC. PPMC has also completed putting together media kits for
sales people in order for them to try and persuade advertisers to purchase
or commit in advance for, four of the 10 ad spaces in the last word(R) for
a period of one year. To make it more attractive to advertisers to do so,
PPMC is offering the spaces at a substantial discount. Should PPMC be
successful in this approach, PPMC will have more than sufficient capital to
start operations. As of January 1, 2000 no spots were sold and there cannot
be any assurance that PPMC will be successful in doing so.
The following "Comparable Rate Analysis" is submitted as support for
the above statement. "At a lower cost, PPMC is able to offer 100% coverage
on shopping carts". Smart Source(R) Carts is PPMC's primary competitor,
therefore, they were used for the purpose of an example.
Comparable Rate Analysis of Smart Source(R)& the last word(R)
News America Marketing-In-Store, SmartSource(R) Cart Rates. Per store
space rates (cost per store including per store production cost) for 1/12th
(8.3%) of advertisers ads on carts facing the shopper and 1/12th facing
away from the shopper. Assuming that each store has 200 carts, they will
have 17 carts that have an advertisers ad facing the shopper and 17 that
will be facing away from the shopper.
8
<PAGE>
<TABLE>
<CAPTION>
Smart Source(R) Cart Rates
--------------------------
<S> <C>
Tier I National $47.83
Tier II Full market sales with 50% or more of store base $62.83
Tier III Full market sales with less than 50% of store base $66.83
Tier IV Chain Specific or less than full market $70.83
</TABLE>
Last Word Management, the last word(R) Cart Rates
The last word(R) is on 100% of the carts. The Cart Rate start at $2.25
(including production costs) per 1,000 checkouts (CPM) and increases to
$3.25. For the purpose of comparison the CPM rate has been converted to a
per store rate using 60,000 checkouts as the average checkouts per month.
The 8.3% percent column is the last word(R) rate (ad on all the carts)
converted to a rate as if the last word(R) were on 8.3% of the carts (as in
Smart Source).
The last word(R), Cart Rates
<TABLE>
<CAPTION>
100% 8.3%
---- ----
<S> <C> <C>
Tier I National $135.00 $11.20
Tier II 50% to 100% of National base $165.00 $13.70
Tier III Less than 50% of National base $180.00 $14.94
Tier IV Chain Specific or less than
full market $195.00 $16.98
</TABLE>
Smart Source(R) Cart Rates (SS), adjusted upwards as if all ads were
on all the carts facing the shoppers as in the last word(R) (TLW):
<TABLE>
<CAPTION>
SS 100% TLW 100%
------- --------
<S> <C> <C>
Tier I $573.96 $135.00
Tier II $753.96 $165.00
Tier III $801.96 $180.00
Tier IV $849.96 $195.00
</TABLE>
Source: News America & ActMedia, media information.
Average cost per 1,000 projections for TV media 1995-96. 30 second TV
ad spot $12.00 with a high end cost of over $20.00 for a prime time 30
second spot on ABC/CBS/NBC affiliates. Source: www.amic.com.
Upon starting operations and to maintain a successful advertisement service
program, seven areas of the business and infrastructure will have to be in
place, they are; (1) manufacturing "the last word(R)", (2) stores willing
to rent space to PPMC, (3) advertisers willing to purchase space in the
last word(R), (4) installers to install the last word(R), (5) printer to
print advertisement inserts, (6) maintenance and changing inserts and (7)
competent administrators.
Tooling and Manufacturing will be handled by Jack Burnett through his
company, Tynex Consulting Ltd. Mr. Burnett has over 32 years of experience
in all facets of injection molding and extrusion processes. His
responsibilities will include, but not be limited to R&D, tooling and
subcontracting out the manufacturing (by injection molding and extrusion
processes) on a competitive bid basis.
9
<PAGE>
Marketing will be handled by Chris Culver of Culver and Associates, an
advertising and marketing company. They had Actmedia's (PPMC's competitor)
account when Actmedia was bought out by News Corp. Culver and Associates'
responsibilities will include putting together media kits (for ad agencies,
packaged foods industry and grocery stores) and advertising PPMC's
advantages in the trade journals that reach the packaged foods industry, ad
agencies and grocery retailers.
Advertising sales and chain store operations will be handled by Last
Word Management. John Hall Dal Brickenden and Clete Thill have over 50
years of experience in selling and managing advertising and retail
operations. LWM's responsibilities will include selling the ads that go
into the last word(R), installation and maintenance of the last word(R) and
the changing of the ad inserts.
Printing will be handled by established printing companies based on
competitive biding.
Administration will be handled in house by Mrs. E.V. (EV) Arnold, CPA.
Mrs. Arnold has over 20 years of experience in administration in the
government, private and public sectors.
The primary administrative function will be to monitor, evaluate,
supervise and direct the subcontractors. The last word(R) will be
warehoused at a distribution center where the first ad inserts will be
inserted into the last word(R) prior to being sent to the installers.
On September 15, 1998, PPMC entered into an agreement with ITG, LLC,
an Oregon Limited liability company. The essence of the agreement was that
ITG, on behalf of PPMC, would rent space on shopping carts from grocery
stores, install and maintain the last word(R) and change the ad inserts.
Subsequently, ITG notified PPMC that they were changing their method of
operations and that they had concerns about being able to fulfill their end
of the agreement. A condition in the agreement for it to become effective,
was for PPMC to make a first payment to ITG, PPMC notified ITG that PPMC
was not going to make the said first payment to ITG. The President of ITG
was most co-operative and mentioned another party that he believed could
handle their end of the agreement. Representatives of Last Word Management
met with this party, but no agreement was reached. Subsequently, PPMC
amended the contract with Last Word Management wherein the responsibilities
that ITG had undertaken, were taken over by Last Word Management.
Three Months Ended September 30, 1999 compared to
Three Months Ended September 30, 1998
General and Administrative Expenses
General and administrative expenses decreased from $140,811 for the
three months ended September 30, 1998 to $67,815 for the three months ended
September 30, 1999. The Company attributes this 51.8% decrease primarily to
a decrease in consulting and sales related expenses.
10
<PAGE>
Interest Expense
Interest expense increased from $9,304 for the three months ended
September 30, 1998 to $12,969 for the three months ended September 30,
1999. The Company attributes the increase primarily to the increase in
borrowings by the Company to meet overhead expenses.
Year 2000
The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable years. Any of
the Company's programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, which could
result in miscalculations or system failures.
The Company has conducted a review to identify, evaluate and implement
changes to computer systems and applications necessary to achieve a year
2000 date conversion with no effect on customers or disruption to business
operations. The Company will also be communicating with suppliers,
financial institutions and others with which it conducts business to
coordinate year 2000 conversions. The total cost of compliance and its
effect on the Company's future results of operations will be determined as
a part of this project. Based on initial review, the total cost is not
expected to have a material effect on the Company's results of operations
or financial statements. However, there can be no assurance that the
systems of other companies on which the Company may rely will be timely
converted or that such failure to convert by another company would not have
an adverse effect on the Company's systems.
PART II. Other Information
Item 1. Legal Proceedings
Bolton V. Purchase Point Media Corp. et al (San Diego Superior Court
case number 728268). This is a lawsuit filed by an individual who alleges
that pursuant to an agreement with Purchase Point Media Corp. he is owed
50,000 shares of its stock. Said allegation is denied by PPMC and the
lawsuit is being vigorously defended. Although Purchase Point Media
Corporation fully expects to prevail in this matter, a judgement in Mr.
Bolton's favor would have an insignificant financial effect on PPMC.
PPMC is not a party to any other litigation (nor is its property the
subject of) any pending legal proceeding.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27.1 Financial Data Schedule.
(b) There were no Current Reports on Form 8-K filed by the registrant
during the quarter ended September 30, 1999.
11
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: March 20, 2000
PURCHASE POINT MEDIA CORPORATION
By: /s/ Albert P. Folsom
---------------------------
Albert P. Folsom
President and Chief Executive Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PURCHASE
POINT MEDIA CORPORATION FINANCIAL STATEMENTS AT SEPTEMBER 30, 1999 AND THE THREE
MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 3,024
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,357
<PP&E> 4,753
<DEPRECIATION> 2,099
<TOTAL-ASSETS> 49,700
<CURRENT-LIABILITIES> 851,511
<BONDS> 0
<COMMON> 260,497
0
170
<OTHER-SE> (1,097,978)
<TOTAL-LIABILITY-AND-EQUITY> 49,700
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 68,441
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,869
<INCOME-PRETAX> (81,410)
<INCOME-TAX> 0
<INCOME-CONTINUING> (81,410)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81,410)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
